How are disability benefit payments taxed?

Disability Benefit Payments

Firstly, disability benefit payments are payments you receive from either your super fund or your employer as a lump sum or an income stream when you suffer from a physical or mental illness that prevents you from working.

 

However, this income is still taxable and you have to pay careful attention to the different parts of your payments to find out what you owe on each one. There are two types of payment components.

 

  1. Tax-Free
    You don’t owe anything on the tax-free component. It’s not assessable and you don’t have to include it on your return.
  2. Taxable 
    The taxable component is divided into a taxed and an untaxed element. The taxed element may have some tax paid on it. Depending on your age, you may owe even more. The untaxed element hasn’t had anything paid on it. You will definitely need to pay tax on it.

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